This is a major tax reform for our economy, which will transform India into a single market.
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The adoption of the GST regime will make manufacturing cheaper, leading to lower prices of a number of manufactured goods. “Otherwise, the sector was facing a tough time categorizing offerings into goods or services to charge VAT/CST or service tax and grapple with problems related to permits and statutory forms for inter-state movement of goods”. The underlying principle is to tax goods at the point of consumption rather than production.
What economic impact will it have?
The finance minister vowed to roll out the new sales tax as soon as possible, but refrained from committing to a firm schedule after missing the original launch date of April 2016.
“If you raise tax by 1 per cent, compliance comes down by 1 per cent”, he added.
How early could we see these results? That’s because there are still some steps before the GST can be fully implemented.
The bill will now go back to the lower house for final approval, and will then require ratification by more than 50% of state legislatures.
The passage of the constitutional amendment bill on Wednesday kicks off a legislative marathon in which both the federal and state parliaments will need to pass further laws setting the rate and scope of the GST. If the rate is higher than the taxes being paid now, it could increase the cost of an under-construction flat.
That won’t be announced for months.
CAIT urged the Union finance minister to include the representatives of trade and industry in GST Council for making them partners in decision making process.
Mr Modi’s top economic adviser and the main opposition Congress party want to cap the rate at around 18 per cent, while some states want a higher levy.
Shares of automakers rose as the heavily-taxed sector is expected to be one of the biggest beneficiaries of a unified and national taxation system.
The constitution laid out the method of taxation in 1950, soon after several so-called princely states – territories ruled by a native monarch under the British Emperor – agreed to join the Dominion of India.
The Rajya Sabha had yesterday approved the Bill on the Goods and Services Tax.
A revenue-neutral rate is a single rate at which there will be no revenue loss to the Centre and states in the GST regime.
Most of these taxes will be subsumed by the GST, barring a few, such as those on vehicles, roads, property and electricity.
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At least e-commerce companies will not complain about the cascading taxes, as the GST is a huge breather, for most of businesses.
